Underneath the chaos of electricity deregulation, part of the answer (my friend) to future energy needs might be wind generation

It's a remnant straight out of a pastoral, Norman Rockwell-like
painting: the windmill, used on farms in the past to pump water
for humans and livestock. With an updated, sleek design more befitting
a fashion house than a farm, today's version is not your mother's
windmill in appearance or task, and thanks to technical evolution,
wind turbines are beginning to produce the electricity environmentalists
once dreamed possible.

Not everywhere, mind you, and not even very much yet. Wind generates
"much less than 1 percent" of the nation's electricity needs, according
to an industry source. While wind electricity has made significant
strides in the last decade, obstacles like high comparative costs
and lack of transmission capacity stand in the way of the industry
reaching its market potential.

Nowhere is the potential for wind-generated electricity greater
than in Ninth District states. Studies of regional wind patterns
show that Great Plains statesroughly the Dakotas, Minnesota,
Nebraska, Iowa and an eastern slice of Montana-hold "nearly 60 percent
of all wind resources" in the nation, according to a report by the
U.S. Department of Energy (DOE).

Wind potential and electricity reality, however, are still distant
cousins in many states. Of Ninth District states, Minnesota is the
only one that generates a significant amount of wind electricity.
Most of it comes from Buffalo Ridge, a 100-mile-long glacial ridge
running through southwest Minnesota and spilling its edges into
both South Dakota and Iowa. Home to over 400 wind turbines, enthusiasts
have dubbed it "Energy Alley."

As of the fall of 1999, Minnesota was second only to California
in wind production, cranking out about 1.5 percent of the state's
total electricity use. Since 1988, the amount of wind electricity
in Minnesota has jumped nearly sevenfold to about 290 megawattsenough
to power 100,000 homes for a year, according to the state Department
of Commerce, and another 160 megawatts are in the works.

North Dakota has the largest wind resource of any state in the
nation, according to a study by the American Wind Energy Association
(AWEA), with the potential to power a third of the nation. The problem
is, the state has only five small-scale wind projects that together
generate less than a half-megawatt of electricitypower for
little more than 100 homes.

Despite being ranked in the top five for wind energy potential
by an industry group, neither Montana nor South Dakota produces
any wind electricity, save for a few windmills providing power to
individual farms and homes.

Kick-start to a market: Incentives and mandates

Changes are afoot. In Montana, the Blackfoot Tribe expects to have a
20-megawatt wind farm online in the north-central part of the state by
the end of 2001, according to a state official. Several large-scale projects
are being investigated in South Dakota, including a proposal by a California-based
wind company that could dwarf any existing wind farm by a factor of 20.

Energy Unlimited of suburban Philadelphia is hoping to tap North
Dakota's potential. The company is developing the state's first
utility-scale wind developmenta 25-megawatt project in Edgeleyand
recently bid on an 80-megawatt project in the Cooperstown area.
According to Robert Markee, the company's director of marketing,
"The wind resource in North Dakota is one of the highest and most
robust of anywhere in the country."

But neighboring states will have to work double overtime to close
the wind gap with Minnesota, whose prominence in the wind market
is largely the result of very deliberate actions by the state.

"Minnesota has taken a very aggressive position" in encouraging
wind electricity, said John Dunlop, regional manager of AWEA. For
example, the state offers a cache of incentivesupwards of
10encouraging both large and small wind projects. Dunlop said
the state's involvement in wind electricity "has been a long, steady
process."

Nearly two decades ago, the state conducted a wind resource assessment
to gauge market opportunities. Then in the early 1990s, a flurry
of policy moves provided property tax and sales exemptions for wind
projects and required utilities to explore renewable options in
any plans for expansion.

All of this preceded a landmark piece of legislation in 1994 involving
Northern States Power (now Xcel Energy), "which really jumped things
off," Dunlop said. That year, the Minnesota Legislature required
the company to either build or contract for 425 megawatts of wind
electricity by the end of year 2002 in exchange for allowing the
company to store spent nuclear fuel at its Prairie Island facility.
Five years later, the state's Public Utilities Commission tacked
on another 400 megawatts by 2012, although this requirement only
stands if wind is the least-cost option.

Two federal production subsidies have also played an important
role in getting the wind industry to its current spot. One program
provides a tax credit of 1.7 cents per kilowatt-hour (kwh) for any
taxable electricity producer; a second program provides a direct
payment of 1.5 cents per kwh of wind electricity for nontaxable
entities like municipal utilities.

Blue light special: Dropping prices, other benefits

While subsidies are helpful in making wind electricity price competitive,
the industry has come a long way in getting a handle on its production
costs. Over the last two decades wind costs have fallen about 90 percent
to 4 cents to 6 cents per kwh (some estimates put it even lower), not
including various state and federal subsidies. That compares with about
2 cents to 3 cents per kwh for traditional sources, depending on the source
type and other factors.

Some in the industry believe that continued improvements in design,
installation and technical aspects will eventually make wind competitive
sans subsidies. "We're striving very hard so we don't have to offer
[wind electricity] at a premium," said Markee of Energy Unlimited.

Most utilities are taking a wait-and-see approach to wind prices.
"You tell me what the price of natural gas is going to be, and I'll
tell you" how competitive wind electricity is likely to be, said
Christopher Reed, director of energy services and marketing for
Moorhead (Minn.) Public Service, which currently operates a 750-kilowatt
turbine and expects to add a second in the coming year. If natural
gas prices stay high, "wind is going to look pretty sweet," Reed
said.

Wind electricity is not without problems. For starters, "wind
doesn't blow all the time," said Rick Halet, principal engineer
for the peaking and renewables department at Xcel Energy. "It definitely
has a place in the resource mix ... [but] you can't directly replace
conventional plants" because of wind's intermittent generating capacity,
which requires a supplemental power source during lulls. In fact,
Xcel's most recent competitive bid for new capacity was awarded
to a project that combined wind turbines and natural gas, Halet
said.

To have a significant impact on electricity generation, "big developers
want to develop hundreds and hundreds of megawatts," which would
scatter hundreds of turbines across the visible horizon, said Georgia
Brensdal, energy program manager for the Montana Department of Environmental
Quality. Where some see clean power, others see visual and aesthetic
pollution. "People want to look at mountains. They don't want to
look at turbines," Brensdal said.

But wind electricity does offer some local benefits. For starters,
landowners typically receive $2,500 to $3,500 per year for siting
a state-of-the-art turbine, according to Markee, and concentrations
of turbines can bring good paying jobs to the local economy.

Wind market seeing, pricing green

Consumers have long been interested in wind energy, but it's not
yet obvious whether the public's support can and will turn into
paying customers. Because wind is still not on par with traditional
sources in terms of cost, consumers interested in buying wind electricityso-called
"green-pricing" programshave to pay a premium to cover that
cost gap. Such programs also require a presubscribed baseresidents
or businesses committing to a fixed amount of wind electricity at
a premium pricebefore wind turbines are erected to serve customers.

In a review of green-pricing programs, the National Renewable
Energy Laboratory (NREL, a research arm of the DOE) found the median
premium was 2.5 cents per kwh, which would add about $20 to the
electricity bill of an average household powered exclusively by
wind (the typical subscriber, however, continues to buy some power
from conventional sources as well).

Currently, there are more than 80 active or planned green-pricing
programs in 28 states, according to NREL. At least 11 planned or
active green-pricing programs are in Ninth District states: seven
in Minnesota and one each in Montana, North Dakota, South Dakota
and Wisconsin. Each project is under 2 megawatts in size and serves
between a few hundred and 1,500 customers, most of whom continue
to get some electricity from traditional sources. According to available
data, each green-pricing program in the district is charging (or
expecting to charge upon start-up) a premium of between 1 cent and
5 cents per kwh of wind electricity.

In many cases, it has not been hard to find small pockets of customers
willing to pay a premium for wind electricity. Thanks to participation
from 27 of its 29 member cooperatives, Great River Energy managed
to sell 4,500 wind "blocks" (100 kwh each) from a 1.3-megawatt project
near Chandler, Minn., "within five or six months," according to
Tim Seck, the company's environmental project leader. Subscribers
paid a premium of 1.5 cents per kwh and the company is "looking
to put up another two to four megawatts" of wind generation in the
future, Seck said.

Moorhead Public Service garnered the necessary 425 subscribers
to its first green-pricing program in 1998 in just two and a half
weeks, according to Reed, and recently filled a second offering
in less than a month.

After conducting surveys with its urban and rural customers, East
River Electric Power Cooperative in Madison, S.D., started marketing
a green-pricing program last April with a premium of 3 cents per
kwh. As of November, the company was "about two-thirds of the way"
to the goal of 2,000 wind blocks and hopes to be online with 1 megawatt
next year, said Dan Ziebarth, a company draftsman and engineering
aide. "We feel real good about it."

Transmission: All revved up and no place to go

Regardless of consumer demand, wind electricity ultimately faces the
same critical constraint of its more traditional energy peers: lack of
transmission capacity. Until the problem is rectified-not an easy propositionthe
only thing blowing in the wind in many states will be hair and hats.

Transmission is a big reason why the wind market in the Dakotas
and Montana hasn't developed in the first place. Kim Christianson
of the North Dakota Energy Office said there was a "very significant
constraint on the transmission grid going east" to heavy-load areas
of Chicago and Milwaukee, he said. "Without transmission constraint,
we'd see a boom in [wind] activity."

Compounding the problem in the Dakotas and Montana is the fact
that all are net energy exporters, and any increase in local demand
can easily be met by existing conventional plants. Any additional
generation added by wind turbines would have to find out-of-state
markets, Christianson said.

Minnesota is also bumping up against a transmission ceiling. Halet
said NSP's first wind projects on Buffalo Ridge had plenty of wind
resource "and the wires to get it to the customer." But transmission
there is now at capacity, and no new projects of any size will take
place until that capacity is expanded, he said.

These developments are typically 2 megawatts or less in output
and can take advantage of small pockets of available transmission
capacity. The state is helping by giving these smaller wind projects
a production incentive of 1.5 cent per kwh. Taylor said such assistance
was necessary for now, but she believed the industry was finally
running with the wind at its back.

"I've never seen this widespread [consumer] support before," Taylor
said, "It's way beyond the geeky types saying, 'We gotta do this.'"